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Montana 48th in tax analysis- We should have ranked in the middle of the pack says Swysgood
Montana ranks near the bottom among the states in taxing and spending wisely, a USA Today analysis published Monday says.
Gazette State Bureau
Montana tied with Mississippi for 48th place, with only California getting a worse rating.
The USA Today analysis concludes the financial problems besetting the states are more the result of poor money management by the states than impacts from the national economy.
The newspaper’s study concluded:
The growth of spending by states during the boom years harms some states today.
The chief kinds of budget expansions from 1997 to 2002 among the states were for education, health care for the poor and property tax relief in which states reimbursed local governments for the lost revenue.
The financially healthiest state – Utah topped the list, followed by Delaware and Georgia tied for second – didn’t enact large tax cuts during the economic boom, USA Today said. Montana enacted some tax cuts during the period, most notably reducing the property tax on business equipment from 6 to 3 percent in 1999.
Governors manage spending better if they have the line-item veto power that allows them to reject individual programs in a bill and have the power to cut budgets without legislative approval if state revenues lag behind projected collections.
Montana gives its governor both of these powers.
States show more fiscal restraint when the same party doesn’t control the Legislature and governor’s office.
In Montana, Republicans have controlled the governor’s office since 1989 and both the state House and Senate since 1995.
Here is where Montana rated in the three categories in the USA Today analysis.
* Spending restraint.
Montana got one star out of a maximum of four stars. It found Montana’s growth in spending from 1997 through 2002, adjusted for inflation and population growth, to be 7.8 percent a year. States got four stars if their spending growth rate was less than 1 percent annually during the period, three stars if it was between 1 and 2 percent annually, two stars if the growth rate was 2 to 4 percent annually and one star if it was more than 4 percent annually. The period under review covered the last four years of administration of former Gov. Marc Racicot and the first two years of the administration of Gov. Judy Martz.
* Bond ratings.
The analysis examined the bond ratings by Moody’s, Standard & Poor’s and Fitch Ratings that look at the ability of states to repay debt and look at a state’s economy, how well a state Legislature had managed state finances and the soundness of state pension funds. The lower the bond rating, the more it costs a state in higher interest rates to borrow money. USA Today averaged the agencies’ ratings for long-term general obligation bonds or similar debt. Montana got only one star.
* Tax system.
USA Today used a tax analysis published earlier this year by Governing magazine that ranked states by adequacy of revenue, fairness to taxpayers and management quality. Montana received two of four stars.
Copyright © The Billings Gazette, a division of Lee Enterprises.
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Budget chief assails analysis of state finances
By BOB ANEZ Associated Press
HELENA – A Martz administration official has attacked a national analysis that ranks Montana as one of the worst states for its effort to raise taxes and manage its money.
Chuck Swysgood, budget director for Gov. Judy Martz, said Wednesday the state doesn’t deserve a ranking of 48th in how wisely it taxes and spends.
"We should have ranked in the middle of the pack," he said in an interview Wednesday.
He said the study, done by the national newspaper USA Today, gives the impression Montana leaders have mismanaged the state’s finances and have been irresponsible in their spending habits.
"I think we got a bum rap on this," Swysgood said.
The newspaper report concluded that only California ranks lower than Montana in how well states raise taxes and spend the money. Montana and Mississippi tied for 48th place in the newspaper report. Utah topped the list, followed by Delaware and Georgia, which tied for second.
The newspaper’s analysis concluded the financial problems besetting states are more the result of their own poor money management than impacts from the national economy.
Brian Schweitzer, Democratic candidate for governor, cited the report two days later as proof that Montanans should be demanding change in state government leadership.
Swysgood said the USA Today analysis was flawed because it was partly based on an assessment of the state’s spending growth that was skewed by two recent developments.
The study gave Montana low marks for spending increases between 1997 and 2002 that averaged 7.8 percent a year.
But Swysgood said that figure was artificially inflated because it counted bookkeeping changes in the way local government funding is handled by the state and the state’s takeover of District Court funding. Those developments, which followed the 2001 Legislature, added about $160 million a year to the state’s ledger, he said.
Swysgood also disputed the state’s poor showing in the study’s analysis of Montana’s bond ratings. Fifteen states that ranked higher than Montana have had their bond ratings downgraded or received a "negative outlook" warning from national financial analysts, he said.
Montana’s bond ratings have not slipped and the state has been praised by rating companies for money management policies that have been adjusted to handle slower economic growth, he said.
Swysgood said the study’s analysis of Montana’s tax system was based on an outdated study done by another publication last year. That report penalized the state for its high tax rates on income and on capital gains, but the 2003 Legislature reduced both of those, he said.
Swysgood noted in the 12-month period after August 2001, the state saw revenue drop $152 million and it had nothing to do with government actions.
Rather, the loss was a product of a slowing national economy that affected every state’s finances, Swysgood insisted. "That was a sign of the times."
http://missoulian.com/articles/2003/07/02/news/top/news003.txt
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